Thursday, April 25, 2013

The 1MDB bonds: A guide for Malaysian politicians and other idiots

Gwo Burne The Second. If you thought Rafizi Ramli was bad, meet Wong Chen, chairman of the PKR trade and investment bureau. His attempt at "exposing" 1MDB's recent bond issue as "shrouded in secrecy" has exposed himself as the new mo on the block, instead. And there we were thinking that, surely, it would be easy for PKR to replace Gwo Burne with someone better than Gwo Burne himself because there could only be one Gwo Burne in this whole wide world. Well, my sympathies to the long-suffering Kelana Jaya people.

Now, I'm no expert - I'm just a seasoned business journalist and a sometimes controversial socio-political blogger - but I can tell when politicians don't know what they are taking about and Wong Chen does not know what he's talking about.

"Wong said that it was a surprise that the government had allowed a yield of 30 years for this privately placed bond when government guaranteed bonds in the past had only a 20-year yield."

The 1MDB bonds are not guaranteed by the Malaysian government. They are bond guaranteed by parties in Qatar, a sovereign country. Malaysian government-guaranteed bonds such as Petronas, Khazanah or Cagamas are ringgit-denominated whereas 1MDB bonds are US dollar-denominated. To compare different denominated currencies is like comparing apple with oranges.

"We are talking about two different credit risks," a financial advisor told me last night.

"... Local banks would have only charged about six figures,” he said.

Now, this is sooo telling. It you one thing: that Wong Chen doesn't know the industry. He said: “If our local banks had arranged for this exercise, they will only charge a nominal fee as it is considered a national duty to work on government backed bonds" Math ain't my forte but according to my calculator, a six-figure fee is less than 0.01 per cent of the RM9.3 billion worth of bonds issued. Not even 1 per cent! Wow. When Ananda Krishnan raised his RM4 billion bonds, he reportedly paid over RM100 million in fees to the banks. Nobody batted an eyelid.

Btw, Wong, national duty is our soldiers and commandos who fought to defend this country and died a "mati katak" death, to quote one of your senior comrades.

Outstanding amout of debt 20 billion.What did they buy.A coal mine in Mongolia.Three publuc company from Taib Family.All the three company are not doing well.BUY power plant ant an inflated price and buy a coal mine in Kalimantan that are not suitable for Tenaga.

How do they spend the rest of money.1MDB chartered a747 plane on new year eve to fly Najib and Rosmah from LA to Sydney so that they can catch the first sunlight in 2013. then They fly from Sydney to Las Vages in order for them to catch the second sunrise in 2013'

The set up of these bonds and the investment structure is overly complicated and the use of the Cayman's jurisdiction makes it look bad. The question to ask is why it was done this way. The Cayman's is a tax haven, okay good. But there are secrecy laws which make it difficult to find out who owns or runs the company. While !MDB may file accounts in M'sia, these accounts will probably say that it has raised the funds and sent them to a Cayaman's company. All investment decisions after this will be invisible to the Malaysian public whose money has gone in there. Also, you have to ask why Qatar is raising investment funds here when its own budget surplus is huge and why should it guarantee Malaysians for their investment risk? Eve if they provide the guarantee, under their law does Malaysia have any right to claim if it goes sour? What is the charge for this guarantee? Or is it free? If you want to invest in Central Asian oil fields or anywhere else as a government, why not do it directly, with simple structures. It may be that PetroSaudi and others required this structure, but what are they up to, why the need for secrecy? Are these really the type of people Malaysia wants to do business with? Also, why is the investment in these oil propectors not going through PETRONAS? They should be the ones with the expertise. As far as I am aware, PETRONAS and its fellow national oil companies ARAAMCO/SABIC/QAPCO are not involved, so what expertise is being roped in to look after this investment? Final question, knowing all the secrecy and complexity - would you be confident enough to put your own money into it?

I really despise DAP and hope all their leaders will rot in hell together with the likes of Anwar, N. ajis, hadi, Mad Syabu, and the gay Rafizi. I'm coming back to Malaysia just to vote for BN/UMNO because every vote counts. Sorry, Datuk Rocky for my digression!

The new CEO, what's his name, Hazim, he was handpicked to make changes or just shaking legs and scratching balls waiting instruction from J-Lo and RM? With below average resume, 1MDB will go down the drain under this wannabe. Good luck Malaysia.

If this country is going bankrupt why does the opposition want putrajaya so much? To save this country? No need to bullshit. For the past 12 GE's the stupid opposition has been saying this. Does the country look as though it is going bankrupt?

This Wong Chen guy didn't get his facts right, but then you should have done what your bosses have done - which is to keep quiet and not bring this matter up. The scam witWh 1MDB can be easily explained as follows :

Rosie goes to CIMB and ask them what is the market yield for 1MDB bonds with either a malaysian government guarantee or a abu dhabi government guarantee.CIMB tells her that both guarantees are about the same rating and the market expects a yield of US Treasuries plus 200 basis points or 2 pct. So if US Treasuries are yielding 3 pct p.a. for 15 years, then the market expects 1MDB bonds to yield 5 pct p.a. for 15 years.

The next steps are when Rosie and Johnny Low pull a fast one on the taxpayers. They go to Goldman Sachs and tell Goldman that 1MDB will be issuing 15 year bonds at Treasuries plus 4.25 pct p.a. Hence the all in yield of the bonds would be 7.25 pct p.a. Goldmans scratch their heads and wonder why 1MDB would issue bonds at this high rate when the market only requires 5 pct p.a. Rosie tells Goldmans not to worry, she already found buyers of the bonds in cayman islands and British Virgin islands. All Goldmans had to do is just lend their name in the prospectus and collect an arrangement fee.

Rosie then sells all the 1MDB bonds to her friends. Her friends in turn sells the bonds to the market at a yield of 5 pct p.a. the difference of 2 pct p.a. is pocketed by her friends. Now for those who can't calculate, 2 pct p.a on USD 3 billion of bonds is USD 60 million (roughly RM 200 million) per year. Multiply that by 15 years and the friends who bought the overpriced bonds stand to earn a total income of RM 3 billion.

Goldmans make an arrangement fee of 2.5 pct by lending their name to the bond prospectus. That's over USD 70 million for joining the scam. Also the Abu Dhabi government gets a guarantee fee of 1 25 pct p.a. which makes the overall cost of issuance by 1MDB at [7.25+1.25] or 8.5 pct p.a. there is reason to believe that the abu dhabi government also gets some form of support letter from MoF. If so, it is clear we never learnt the lessons of PKFZ.

So who gets screwed ? The government of malaysia who represents the taxpayers get screwed. If the government were to issue the bonds directly, the country would only pay 5 pct p.a. With this caymans caper, the cost to our taxpayers is 8.5 pct p.a. the difference of 3.5 pct p.a. on a USD 3 billion issue is over USD 100 million per year. Multiply this over 30 years and you will get an idea of how much has been creamed off by these crooks.

Now that we have learned to inflate our liabities, we will be able to find out who were the first wave of bond buyers who had the good fortune to buy malaysian bonds at such an unbelievable yield.

So next time when Najib asks you what you want as a reward for pushing BN shit uphill, you must ask him for a guarantee from the MoF for USD 500 million. Cukup lah 500. Then go issue sovereign bonds at 8 pct p.a. sell them to your buddies' companies and yourself at full value, and then place it out to the market at the real yield of 5 pct p.a. your buddies and you will enjoy annual recurring income of 3 pct on 500 million or USD 15 million a year for the full duration of the bonds. 30 years would be best.

So you want me to be your financial advisor or not ? Let's screw our taxpayers as very few understand high finance.

What type of comment is this ? Don't be too emotional when the country is being bled by BN, now with sophisticated structures involving billions ? Your crooks will bring this country to its knees but of course they don't care. They already have offshore accounts in singapore, london, sydney, cayman islands, BVI, Luxembourg.

Unfortunately many rural folks cannot fathom what is 1 billion. They just take their 500.

Looking at all the racists comments from people who think more about the color of their skin than the survival of their next generation in Malaysia, I wish all you stupid idiots good luck when the country collapse in on its own debt. Sayonara jokers.